Lenders in court over ‘serious’ credit breaches

ASIC alleges that Green County and Max Funding failed to make reasonable inquiries about the purpose of loans, which led to Green County providing personal loans to certain borrowers.

Neither Green County nor Max Funding was licensed to provide personal loans or act as an intermediary.

ASIC alleges that this resulted in these vulnerable consumers not having the benefit of important protections under the code and being charged more for their loans than they lawfully should.

ASIC alleges that Green County and Max Funding operate a credit lending model where they rely on an exemption from the need to hold an Australian credit licence by Green County, requiring prospective borrowers to sign a business purpose declaration.

However, the corporate watchdog said business purpose declarations are ineffective including where a credit provider would have known, if they had made reasonable inquiries about the credit purpose, that the credit was in fact to be applied for personal use.

ASIC further alleges that Green County contravened the consumer protection provisions in the National Credit Code by:

• Exceeding the 48 per cent annual cost rate cap for certain credit contracts
• Failing to specify the annual percentage rates for certain credit contracts
• Failing to specify the total interest payable for certain credit contracts

The National Credit Code contains a prohibition on credit providers entering into a credit contract where the annual cost rate exceeds 48 per cent. The cost rate is determined by a formula that takes into account fees and charges and the timing of repayments.

“The Credit Act provides important safeguards for consumers who apply for personal loans to protect consumers from unfair lending practices. If you are prohibited from providing a certain type of loan because you are not licensed, it is ASIC’s expectation that there are processes in place to help ensure those loans are not provided,” ASIC deputy chair Sarah Court said.

“ASIC’s allegations of providing personal loans without the proper licence and breaching directors’ duties are serious. Directors and officers have a fundamental responsibility to take reasonable steps to ensure that their organisations have systems in place to comply with the law.”

ASIC also claims that Ivy Tang Gy Ng breached her duty of care and diligence as a director or officer of these companies and ought to have taken reasonable measures to avoid the companies breaching the Credit Act and the code.

The regulator is seeking declarations, pecuniary penalties, injunctions, disqualification orders, and other orders from the court.

[Related: Corporate watchdog sues Macquarie]